In what the Australian Conservation Foundation has described as the "least worst option" the material will be stored in a temporary, purpose-built storage facility at Lucas Heights while Industry Minister Ian Macfarlane examines possible sites for a future Australian nuclear waste dump.

The funding is part of an agreement with the UK to return one of two batches of Australian waste, which the government said was largely generated from scientific research and nuclear medicine over a number of decades.

The second batch of nuclear material was sent to a facility in France for processing and its return has been funded in budgets since 2010.

Australian Conservation Foundation nuclear-free campaigner David Sweeney said of the federal money: "We believe the waste coming back to Lucas Heights is the least worst way to manage it."

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"That is – it's still not a good thing," he said.

"But because of the expertise, security and the presence of a purpose built facility at Lucas Heights it is the most appropriate option for the nation."

The government is currently conducting a search for a location for a national radioactive waste dump.

At the same time, the South Australian government has launched a royal commission into nuclear energy that will examine, among other things, whether the state could establish its own waste dump for nuclear material from other countries.

The possibility of a nuclear waste dump in South Australia has prompted concern from environment and indigenous groups.

It comes as iron ore company Gindalbie Metals announced on Wednesday it had proposed a section of land it owns in Western Australia as a potential site for a national nuclear waste facility in a government tender process.

We believe the waste coming back to Lucas Heights is the least worst way to manage it

The ABC reported that the site is at Badja Station in WA's mid west and is currently the subject of a native title claim.